He Retired at 63 With $520,000 and Converted $45,000 a Year Until 73. The Average Retiree With the Same Balance Converts $0 and Meets a $32,000 RMD Instead
Two retirees leave work at 63 with identical six-figure balances, make opposite decisions about their tax exposure, and arrive at 73 with very different monthly obligations waiting for them.
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In a scenario like this one, we can follow two retirees who each leave work at 63 with $520,000 in a traditional 401(k) or IRA. The first moves $45,000 a year into a Roth IRA for a decade. The second does nothing, which is what happens by default, and at 73 he faces a required minimum distribution (RMD) of about $32,000. Both men pay tax on the money eventually, but the difference is when they pay it and who sets the amount.
Where $520,000 Ranks Among Retirees
A balance of $520,000 is well above what most people have near retirement. Fidelity puts the average 401(k) balance for savers aged 65 to 69 at $251,400. Transamerica found median household retirement savings of $270,000 among baby boomers.
Across all ages, Vanguard reports an average 401(k) balance of $148,153 and a median of $38,176. A few very large accounts pull the mean higher, while the median represents the middle saver. Most of this generation’s savings is pretax, and among baby boomers, Fidelity puts Roth 401(k) adoption at only 12.2%. That means most of their balances will eventually be subject to RMDs.
Same Starting Balance, Very Different Accounts at 73
Another factor is that both retirees in this example were born in 1959, so their RMD age is 73. For people born in 1960 or later, it’s 75. The example assumes 5% annual growth and one conversion at the end of each year from age 63 through 72. The first RMD uses the IRS Uniform Lifetime Table factor of 26.5 for age 73.
| At Age 73 | No Conversions | $45,000 a Year Converted |
|---|---|---|
| Total converted to Roth | $0 | $450,000 |
| Traditional balance | About $847,000 | About $281,000 |
| Roth balance | $0 | About $566,000 |
| First RMD | About $32,000 | About $10,600 |
The retiree who never converted let the whole balance grow, so his RMD is figured on a larger pretax account. The converter ends up with about the same total wealth, but most sits in a Roth. The original owner of a Roth IRA never has to take RMDs. As Suze Orman said, “in a Roth of any kind now, RMDs are not required.”
Why a Forced $32,000 Withdrawal Adds Up
An RMD counts as taxable income, and it arrives on top of Social Security. On the Clark Howard podcast, a guest advisor said retirees can end up in higher brackets because “when they get into their 70s, they have big IRAs. And those IRAs produce RMDs.”
Social Security benefits continue to grow each year. The 2027 cost-of-living adjustment is on track for 3.3%. Interest from savings adds more. On average, a 12-month CD pays 1.73%, and that interest can make more of a retiree’s Social Security benefit taxable.
What the Converter Paid Along the Way
A Roth conversion counts as ordinary income in the year it happens, so the converter paid tax on $450,000 over ten years. He picked the size of each slice and did it in the years between his last paycheck and his RMDs, when his taxable income was probably at its lowest (those quiet years before required withdrawals begin are the subject of a free guide we put together on the Roth window). For a married couple in 2026, the $32,200 standard deduction covers part of each year’s conversion when there is little other income.
Spreading the conversions out is the common approach. The same Clark Howard episode said, “typically the right way to do Roth conversions is in chunks spread out over time,” because one large conversion can push a retiree into a higher bracket. Orman has also pointed out that conversions count as income for Medicare purposes. That can raise premiums while the conversions are underway.
Assumptions That Could Change the Result
The comparison depends on its inputs. Returns above or below 5% change every number in the table. Anyone born in 1960 or later gets two more years before RMDs begin, which leaves more room for conversions. No one knows future tax rates. The converter paid tax at rates he could see, while the other retiree will pay whatever rates apply after 73. Orman summed up the tradeoff this way: “The more you get to convert, the less your RMDs are going to be as well.”
Both men started with the same account at the same age. One paid tax in amounts he chose over ten years. The other will withdraw on a schedule set by an IRS table, beginning at about $32,000 a year. Morningstar’s recent coverage of RMD mistakes that can increase tax bills reminds us that people often pay less attention to this stage of retirement than to saving for it.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
